whether the service provided to the students for lodging along with food is a composite supply and whether supply of such service is eligible for exemption. And what is the rate of tax for the combination of services he provides, if it is not considered a

PJ/Case Law/2018-2019/3527

CASE:SARJ EDUCATIONAL CENTRE
Citation: GST-ARA-72/2018-19/B-165
ISSUE: whether the service provided to the students for lodging along with food is a composite supply and whether supply of such service is eligible for exemption. And what is the rate of tax for the combination of services he provides, if it is not considered a composite supply.
Brief Facts: The applicant is the owner of a private boarding house and is providing services of lodging and food exclusively to the students of a secondary school. Applicant wants to seek a ruling on whether his service to the students for lodging along with food is a composite supply and whether supply of such service is eligible for exemption. The Applicant also wants to know what should be the rate of tax for the combination of services he provides, if it is not considered a composite supply.The Applicant, has entered into an MOU with St. Michael’s School under the management of Sunshine Educational Society, for providing boarding facility exclusively to the students of the said school. The boarding facility includes lodging, housekeeping, laundry, medical assistance and food.
The Applicant refers to Circular No. 32/06/2018, dated 12-2-2018 of CBIC. It has clarified that accommodation service to students in a hostel having declared tariff below one thousand rupee per day is exempt under Sl. No. 14 of the Exemption Notification. Further reference to Sl. No. 66 of the Exemption Notification, and argues that his services to the boarders should also be considered exempt under that entry of the said notification.
Respondent’s Contention: Revenue states that it appears that the services provided by the applicant will fall under Composite Supply as defined under Section 2(30) of the GST Act. Revenue also points out that exemption under Sl. No. 14 of the Exemption Notification does not cover the service of providing food supplied by the applicant.
Reasoning of Judgement:
1. Sl. No. 66 of the Exemption Notification is applicable to the services provided by or to an educational institution, as defined under clause 2(y) of the said notification. The Applicant is not an educational institution.
2. The bundle of services offered to the recipients, therefore, consists of both taxable and nontaxable supplies. It is also evident that although the services are offered in a bundle, they are not indivisible, and different considerations are paid for different packages of such services offered to the recipients, depending upon their requirement for lodging facility. For example, laundry service is not offered to the day boarders.
These are not, therefore, bundles of taxable supplies that are inseparable and supplied only in conjunction with one another in ordinary course of business. The services the Applicant supplies are not, therefore, composite supply, as defined under Section 2(30) of the GST Act.
3. Applicant is offering several individual services in two different combinations to the recipients, depending upon their need for lodging facility. Each of the recipients, however, is charged a consolidated amount for the combination of services he wants to enjoy. The combination of services is, therefore, offered as a mixed supply within the meaning of Section 2(74). In accordance with Section 8(b) of the GST Act it is stated that, “a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax.” As has already been discussed, each of the combinations includes services taxable at 18% rate, which is the highest rate applicable to the services being offered vide Section 8(b) of the GST Act. Being mixed supply, value of the entire combination of services offered is taxable at 18% rate.
Decision: Applicant is offering several individual services in two different combinations to the recipients, depending upon their need for lodging facility. None of the combinations of services being offered is a composite supply, as defined under Section 2(30) of the GST Act. They are mixed supplies within the meaning of Section 2(74) and taxable in accordance with Section 8(b) of the GST Act. Being mixed supply, value of the entire combination of services offered is taxable at the applicable rate.
Comment:
The issue involved in application involves two issues. First whether the applicant falls under the definition of Educational Institution in order to claim exemption. And the other being the type of supply of Service whether Composite or Mixed Supply and the applicable rate.
Let us see the definition of Educational educational Institution as per 2(y) of the Notification No. 12/2017-Central Tax (Rate) dt 28^th June 2017.
“(y) “educational institution” means an institution providing services by way of,-
(i) pre-school education and education up to higher secondary school or equivalent;
(ii) education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force;
(iii) education as a part of an approved vocational education course;”
The applicant doesn’t fall in the above definition. Further he doesn’t provide services to educational institution but he provides services to individual students.
The services provided by the applicant are divisible and can be taxable separately. So it doesn’t provide composite services. So , the AAR has passed the ruling in the favour of department saying the service as mixed supply and table at the rate of 18% o the basis of the above provisions.

Prepared by Kasif

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PJ/Case Law/2018-2019/3527

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